• November 7, 2012

Kraft Foods Group (KFG) reported revenue and profit gains in the third quarter, its first as one of two new independent companies created in the Oct. 1 split-up of the old Kraft Foods.

KFG, consisting primarily of the North American foods businesses (its independent sister company, Mondelez International, comprises the global snacks businesses), reported that its net income for the third quarter rose to $470 million or 79 cents per share, from $417 million or 70 cents per share in its previous fiscal Q3.

KFG's net revenues for the quarter grew 3%, to $4.6 billion, which the company said was driven mostly by volume gains and sales of a higher-priced mix of products, with a smaller contribution from price increases, reported Reuters.

KFG also affirmed its full fiscal 2013 outlook, which calls for earnings of $2.60 per share and revenue growth in line with that of the overall North American food/beverages market.

Other highlights of KFG's Q3:

*Organic Net Revenues increased 3.2% from volume/mix gains of 2.6 percentage points and favorable pricing of 0.6 percentage points, reflecting significant gains from new products. 

*Customer inventory shifts, largely related to the spin-off, benefited volume/mix by 2.6 percentage points. These gains were partly offset by 1.3 percentage points from product pruning.

*Operating income growth (+7.6%) reflected volume/mix gains, improved productivity and increased investments in advertising and consumer spending.

*Restructuring costs of $54 million negatively impacted operating income growth by 7.7 percentage points, while the year-over-year change in unrealized gains/losses from hedging activities added 10.2 percentage points of growth.

Results by category segments or businesses included:

Beverages: Maxwell House and Gevalia retail coffees, Kool-Aid Jammers and MiO delivered strong consumption gains. However, top-line growth was tempered by lower merchandising levels of Capri Sun and lower pricing in coffee as green coffee costs declined. Beverages operating income declined versus the prior year due to restructuring costs.

Cheese: Kraft natural cheese, Philadelphia and Velveeta drove strong volume/mix gains. Strong operating income growth reflected improved volume/mix driven by a significant increase in advertising and consumer spending, better alignment of prices and input costs versus the year-ago quarter, and productivity gains.

Refrigerated Meals: Innovations in Lunchables and Oscar Mayer cold cuts and bacon continued to deliver profitable growth. The segment's double-digit operating income growth reflected a significant increase in advertising, productivity gains, better alignment of prices and input costs versus the year-ago quarter, and improved product mix.

Grocery: Brand-building investments and innovation continued to drive strong gains in Kraft Macaroni & Cheese, Velveeta dinners and Cool Whip. Volume/mix gains from retail inventory increases were more than offset by lower volumes in JELL-O desserts and Planters nuts. Planters volume declines related to significantly higher price levels versus the prior year. Grocery operating income declined as brand-building investments, restructuring costs and higher overheads more than offset significant gains from better alignment of prices and input costs versus the year-ago quarter and favorable productivity.

International and foodservice: Significant volume/mix gains were led by a combination of strong growth in Cracker Barrel cheese and Tassimo and MiO beverages in Canada and customer inventory build-ups. The segment's double-digit operating income growth was driven by volume/mix gains.